In this Issue December 2013

The Pennies and the Pounds 1 The best and the worst of the NZX50 since The Pennies and the 2009 3 NZ Windfarms AGM 25 The 2013 Beacon Award 4 Skellerup Holdings AGM 25 Pounds Takeovers Panel provides easy to read guides 5 AGM 26 New Regulations for providers of custodial Pumpkin Patch AGM 26 espite changing to decimal currency in 1967, here is services 5 Barramundi Fund AGM 27 an old saying that still rings true. “If you watch the Company Meetings Marlin Global Fund AGM 27 pennies, the pounds will take care of themselves”. In Telecom AGM 6 Precinct Property AGM 28 D other words, do the small things well and the big outcomes AGM 7 AGM 29 will eventually follow. Hellaby Holdings AGM 8 Chorus AGM 30 Mighty River Power AGM 9 Vital Healthcare Property Trust AGM 30 When it comes to their shareholders, it seems that some Michael Hill International AGM 10 AWF SGM 31 companies are forgetting this maxim. Over the past year we Ebos AGM 11 Bathurst AGM 31 have seen increasing evidence of inadequate or potentially City Entertainment AGM 12 NZ Oil and Gas AGM 32 misleading information being provided in resolutions and TeamTalk AGM 13 Auckland International Airport AGM 33 notices of annual or special meetings. In most cases this is AGM 14 Caught on the Net 34 unlikely to be a deliberate attempt to confuse shareholders. Cavalier Corporation AGM 15 Branch Reports But it does raise questions about, if the company can’t get Freightways AGM 16 Auckland 35 the small things right, what are they doing with the big stuff. Sky Network Television AGM 16 Bay of Plenty 36 Equally important is how companies react to feedback on AGM 17 Waikato 37 such issues. The Warehouse AGM 18 37 Some matters may seem trivial. For example, a few companies Abano AGM 19 Canterbury 37 are still using a two-box voting format which many share- AGM 20 Upcoming Events 37 Lyttleton Port Company AGM 21 Members’ Issues holders who want to appoint a discretionary proxy find AGM 22 Political donations - A tax on shareholders’ 38 difficult to interpret. The outcome is that many shareholders PGG Wrightson AGM 23 Hard copy harder to get 38 don’t bother to vote and others don’t succeed in making their Vector AGM 24 intentions clear. This accidental disenfranchisement is unsatis- factory. A recent example is the KIP SGM form. The Association

ISSN 1179 -4275 has been actively pushing a simplified and Another more problematic example is that of director and the higher fee pool would be standardised format that makes the whole A2 Corporation. This company has done very needed to fund this. Had this information process much easier. All the companies we well in recent times. Shareholders are happy, been available to us, (as it apparently was have contacted on this including KIP have and have approved significant director fee to at least some institutions), we may well been very willing to review their documen- increases on several occasions. This year have come to a different conclusion when tation to make it more straightforward. We we opposed the increase being sought and formulating our voting intentions. But how encourage you to either vote or appoint the suggested based on our own fee survey that shareholders are supposed to know what NZSA as your proxy so that you can have a a lower figure would be more appropriate. We they are not told is beyond us. Once again, voice. were criticised by two large fund managers only those actually at the meeting got the Of more concern are annual meeting resolu- for taking this stance “because A2 is in an full story, and everyone else was to some tions that do not reflect the reality of what is international growth phase and it needs to extent disenfranchised. intended. Both NZX rules and the Companies bring on (expensive) overseas directors with It is also interesting to note that the AGM Act have provisions that in essence, say that the appropriate skills which is why they need results were not posted until 25 November shareholders must be given sufficient infor- the extra fees and pool”. and as at the time of writing, Mr Hinton’s mation to make a properly informed choice. Now, we would have no argument with that. resignation has still not been notified – so This is not happening in all cases. But it was not what shareholders were asked much for continuous disclosure. Jason’s The Warehouse recently asked for a signif- to vote on. Resolution 6 asked for permission Travel Media (which just went into receiv- icant increase in the director’s fee pool. to increase the board to 8 to allow a further ership) was recently censured by NZX There was no detail about what the extra appointment. Resolution 7 asked for a 140% for failing to notify a director resignation amount was for. So at first glance, you could increase in the director’s fee pool. The notes as required under rule 10.7.1.d. Is it any be forgiven for thinking this was just another showed this would fund a 41% increase different for A2? example of snouts in the shareholders for the chair, a 76% increase for director’s So why are we concerned about these trough. In fact, that was not the case at base fees plus extra committee fees. It also minor details, some would say. After all KIP all. Members who receive email pulses will included provision for the extra director. and WHS are tracking OK and A2 is going know that on enquiry NZSA was provided When formulating our view, we attempted gangbusters. What does it matter? detailed information showing individual base to contact the company by phone (cut off It actually matters a lot if we consider where fee increases (the first since 2011) were only signal), registered office (no-one could help) a lack of attention to detail can end up. about 4%. The balance was mostly to provide and email (no reply). So as any shareholder Diligent is a case in point. This company has for an additional director. Our members may would do, we relied on the information identified and exploited a niche worldwide have been able to vote from a position of provided. At the meeting the reality was market opportunity and has gone through knowledge, but everyone else who provided very different. Julia Hoare, a capable NZ a huge growth phase. To some extent, it a proxy could not, as the detail was only based accountant was up for election which appears that this has led to a lack of time presented to those few at the meeting. The made the board total 8. Therefore resolution being devoted to ensuring details and obliga- Chairman acknowledged that the Warehouse 6 which we supported was appropriate. tions are properly considered and actioned. should have done better/ will do better in But then it was announced that Greg Hinton What started as a problem with accidentally future. had stood down to make way for an overseas overpaying CEO bonuses has morphed into The Scrip December 2013 2 a whole series of disclosures of there may be no pounds. The administrative and accounting NZSA will pursue issues that The best and the worst of the shortcomings. The company is we see as material to ensuring now working through restating a properly informed market. its annual accounts for the And we will make sure those NZX50 since 2009 past several years. Individ- complaints are taken seriously ually, each matter is not that by the NZX and regulators. n his recent talk to Auckland Branch, Brian Gaynor showed the dramatic, but taken together We are not trying to win a following slide which is based on Total Shareholder Returns of the they create a pattern that is popularity contest. We are here INZX top 50. hard to ignore. The distraction to ensure shareholders are all Firstly, the success of the top 3 is the result of recent runs in the share these problems are now treated equally, and that in the market rather than dividends or real earnings growth. They do not causing, the direct cost and words of the FMA, markets are pay dividends. This Brian observed, suggested that investors were the impact on management fair efficient and transparent. becoming more confident. time and effort are difficult I think most of you will have Secondly, in this climate of growing confidence, share selection is to gauge, but they are likely had a good run with your always important. It was less important in 2009 after the GFC, than to be substantial. In the investments, despite some it is today, after a recovery. Makes good sense, but of course techni- meantime, the shareholder is headwinds toward the end of cally, it’s not financial advice. suffering the consequences. the year. In a cowardly act of While accepting that there the first order, I have decided Best and Worst Since March 2009 are other external factors also not to risk my hard won crystal- in play, the company’s share ball-gazing reputation from +4,974% NZOG (6.5%) price is now below where it the last two years by second Diligent +2,767% Contact Energy +26% was when these issues first guessing what 2014 will bring. A2 Corp +1233% Trustpower +31% surfaced, at a time when the However, I can assure you that market as a whole has moved the hardworking members of Ryman +608% F&P Healthcare +34% up strongly. Looking at a graph the National Board and the +481% Precinct Property +45% of the DIL share price, it is Committee members who Skellerup +352% GPG +48% hard to avoid concluding that keep your branches running so +301% Steel & Tube +49% there is a correlation between successfully will continue to do Michael Hill +280% Kiwi Income +57% the various revelations and a our best for you. gradual erosion of shareholder Hallenstein Glasson +211% Vector +62% To all our members, a very confidence as a result. NZX +206% PFI +63% Merry Christmas and my best So my message is this. We wishes for 2014. should be concerned if the John Hawkins small things are not done well. If you don’t watch the pennies,

The Scrip December 2013 3 The 2013 Beacon Award he NZSA Beacon Award for outstanding leadership and guidance on corporate practice has been awarded to Mr TSean Hughes, outgoing CEO of Financial Markets Authority. This was a very easy decision for the board, and was supported by nominations received from you, our members. As the first CEO of the FMA, Sean has done an outstanding job building an organisation that is respected by investors and market participants alike. Equally, both he and FMA are feared by those at the fringe who have in the past been able to manipulate commercial matters to their own advantage. One reason for this broad support has been Sean’s insistence that both he and FMA be excellent communicators and attentive listeners when setting the regulatory scene or addressing the inevitable conflicts of interest that arise over particular issues. Within that process, he has always held the NZSA to be one of the key participants and actively encouraged our input across many different areas. Another great strength has been to select a team that shares his clear vision about what needs to be done to establish a respected regulator and rebuild confidence in the capital markets. The NZSA is sure that while shareholders will be disappointed that Mr Hughes has decided to move on, the organisation he has built will continue on the solid foundation he has established. This will be a lasting legacy to the outstanding effort he has put in over the past three years. He is indeed a very worthy winner of the 2013 Beacon. John Hawkins

The Scrip December 2013 4 New Regulations for providers of custodial services n what, in legislation terms is impressive haste, the and both forward a copy of the audit and assurance government has issued a draft of a Financial Advisers report to the FMA; and post a copy on the custodian’s I(Custodians of FMCA Financial Products) Regulations website. 2013. Consultation on the draft closes on January 21st At 7 pages the regulations are mercifully brief. Unlike 2014 with an intention that the regulations be in force the iterative supporting material (explains why parlia- by 1 April 2014. mentary television always shows members reading An April fool’s joke they are not. They will make it rather than listening). They do offer one glimmer of compulsory for the providers of custodial services to unintended humour. A subclause does not apply where One clause does make available to their clients a record of all transac- wholesale clients are “large persons within the meaning not apply to tions effected by the custodian for their client. The infor- of clause 39 of Schedule of the Financial Market Conduct ‘large persons’ mation must be provided either through an electronic Act 2013.” facility (but only if clients have confirmed they want the Custodians may see the regulations as an opportunity to information provided this way), or by giving it to the increase their fees. Resist vigorously. They already are, client by delivering or sending it to the client’s address. or should be providing this service. For holiday reading These regulations will not be an onerous chore for most on this matter go to www.med.govt.nz/business/ custodians. You probably already receive this detail from business-law/current-business-law-work/ your custodian. It will make it more difficult for the likes dims-and-custody of Ross Asset Management and other ponzi schemes to Bruce Parkes wreak their havoc. With this in mind, the custodian must obtain within four months of the end of the custodian’s accounting period an audit and assurance engagement Takeovers Panel provides easy to read guides e are pleased to see that the Takeovers panel has just released a guidebook which outlines in a very clear and understandable way just how the Takeovers Code rules work. This short but highly educational 16 page booklet should be compulsory reading for every Wshareholder. For those members who do not access the internet, NZSA has obtained hard copies of the guide and these are included with this month’s posted Scrip magazine. For the majority of members who have internet capability, we recommend you go to www.takeovers.govt.nz where you will find a link to both the basic guide, and also a range of useful information pamphlets. John Hawkins

The Scrip December 2013 5 Company Meetings listed companies now usually post AGM presentations by the chair and CEO, on their website. Our commentaries therefore concentrate on the flavour of the meeting and the questions raised by shareholders. We encourage members to use the company website, before attending the general meeting, to see what has been said previously, and to familiarise themselves with the latest news. Comments are those of the attendee, who will often be a shareholder in the company, and are not necessarily NZSA policy. Run your cursor over the report heading for a link to the company website Telecom AGM 8th November

modest crowd experienced an costs, and becoming customer and services CEO Simon Mouter then gave an animated innovative relaxed format, with centric. Against increasing competition and wide ranging address where he detailed Adirectors sitting in easy chairs rather Telecom is competing aggressively on price some specific initiatives and expanded on than hiding behind tables. As well as those and targeting market share and a stronger the Chairman’s comments. He stressed up for re-election, all directors addressed the customer base. Some noncore businesses the revolution in data, wireless, mobile, meeting, outlining the skills they brought and have been sold and more relevant ones such anywhere/ anytime and cloud computing was their own aspirations for the company. It as Revera purchased. There is determination accelerating and to capture value Telecom was a clever way to highlight the balance of to significantly reduce operating costs and needed to become a true retailer of data skills around the table and was much appre- staff levels. and digital services. In such a large organi- ciated and commented on by shareholders For the last year revenues of $4.178b were sation, inertia is a problem and it requires present. down 8.5%, EBITDA down 14.6%% and bold decisions and numerous initiatives Chairman Mark Verbiest made every effort net profit down23.5%. After stripping out being pushed forward in parallel to effect to encourage shareholder participation with $130m of restructuring and asset impair- change quickly. He identified the key tasks a Q and A session following his and the ments incurred as the transition is worked as revolutionise the customer experience, CEO’s addresses. Further question time was through, the adjusted figures show EBITDA simplify the business, win key markets and allowed when each resolution was put and virtually flat and underlying profit increasing. win the future. all resolutions were decided by poll. All very FY14 is expected to be equally difficult with The CEO said market share was improving in impressive, and it certainly encouraged input continued change and intense competition. some areas and the slow bleed of customers from the floor. However, the current dividend is maintained had been arrested. Daily or weekly reporting The Chairman covered the key strategic at 16c with similar guidance for FY14. Short instead of monthly was improving the speed issues facing the company as it repositions term bonuses have been slashed as objec- of decisions. Most importantly, the company into a leading edge retailer and seller of mobile tives have not been reached and the MD has was developing “an owner’s mindset” where and broadband data solutions. He said the a new, tough long term incentive plan with all cost decisions were weighed against the company is making rapid progress in trans- 3 year total shareholder returns needing to bottom line returns. forming itself, removing legacy systems and compound at 20%pa before he gets the lot. Question time was wide ranging. Some key

The Scrip December 2013 6 items were: with intermittent very large sales, but usual consumer protection legislation, • Was the board confident the share price that was the nature of the operation. Telecom faces no regulation. If the price would rise? The chair responded that Traffic continued to increase. Offsetting from Chorus drops this will have to play the board was confident in the strategy prices which have reduced 99%over the through to see how much competition and that the share price would follow years and the cable costs account for ensures this is passed through. It may when the company “had runs on the less than $1 in a typical $75 monthly or may not bring some advantage. board”. broadband charge. Resolutions to re-elect Maury Leyland, • What was the situation in regard to the • Can they get all the IT staff they need? Charles Stitch and Justine Smyth were all value ascribed to the Southern Cross Short answer is yes. passed by more than 99%. cable given its variable earnings and up- • How did regulation affect them and what John Hawkins coming end of life? The MD stated flatly about the Chorus situation? Other than that there were still many years of life in one small area where they are disad- in the cable. Yes earnings were lumpy vantaged until December 2014 and the Fletcher Building AGM 16th October

here was some symbolism in Fletcher Building using the Eden Waters passed without comment. It was questions from the floor Park South Stand for its annual shareholder meeting. Fletchers during general business that generated media “headlines”. Tbuilt the stand; only the All Blacks and Fletchers can fill the The development of the Formica plant in India was long planned space allocated (perhaps the Blues on their day?); and like the All and the company will look for opportunities for further growth. This Blacks, the Fletcher team is subject to ongoing renewal of personnel. plant – while small compared to a development in China – has been Chairman Ralph Waters, while elected by the meeting for another very successful. term, announced that he would be standing down as chairman in There are opportunities for organic growth in the residential housing 2014. This allows time for identifying a replacement from within or market. Experience gained in building apartments – as in the Stone- outside the current board. As chairman of the ICC 2015 world cup, fields development – can be used elsewhere. In Auckland, finding his interest in Eden Park will continue. Mr Waters also announced available land is the biggest hurdle. the impending retirement of Company Secretary Martin Farrell. The dividend payout ratio will be maintained. For a question on The addresses by Mr Waters and new CEO Mark Adamson repeated Loan Valuation Ratios, John Judge was asked to put on his ANZ Bank the material recorded in a review sent earlier to all shareholders. NZ chairman’s hat and provide an answer. It is good to have that New Zealand business is up, Australia and the rest of the world is expertise on the board. down. Overall, net earnings were up 7.6%; gearing is down to 32% As with some sports events, the catering firm had a little trouble and dividends are expected to rise in the future as earnings grow. coping with the initial refreshment rush. To those attendees whom Through simplifying the divisional structure, streamlining back office I heard grumbling, be assured, one Director while searching for a and IT functions under an FBUnite project, pre tax benefits of 75 – sandwich vowed that they would do better next year. 100 million is expected over time. Bruce Parkes Resolutions to re-elect directors Tony Carter, John Judge and Ralph

The Scrip December 2013 7 Hellaby Holdings AGM 24th October BY, the “buy, build and harvest” investment company had confirmed its acquisition strategy in the 2012 meeting and shareholders were pleased to see some positive steps this year. HNZSA had criticised its capital raising which was institutions first, followed by a share purchase plan. Chairman John Maasland explained that time was short, (with the upcoming energy floats) increasing liquidity was the aim by involving the institutions, and holding on to existing shareholders with a share purchase plan was expedient. Larger capital raisings would demand a rights issue and the board was conscious of NZSA preference for this approach. The presentations can be viewed on the website: www.hellabyholdings.co.nz John Williamson, CEO, justified the investment strategy with reference to the two recent acqui- It was good to see Bruce Sheppard sitions, Contract Resources, and Federal Batteries. Hellaby is seeking geographic diversity, scale in each division, organic growth opportunities, bolt-on additions to already successful opera- quizzing the board about the tions, and entry to new sectors, all involving a considered process with shareholder returns in aged grey accountants who make mind. up the board John felt that the reshaping of Hellaby away from the import businesses of the past should justify a p/e greater than current broker forecasts of 9.5*, given that the market average was 15*. Andy Wells delivered an eye opening view of Contract Resources, where Hellaby’s investment in 85% of the company alongside the founding shareholders should lead to global expansion. Employee numbers in Australia (476), NZ (78), USA (189), and Middle East (250) are a guide to the existing scope of work - decontaminating, disposing of sludge, pipe cleaning amongst the refinery towers of leading producers - and the significant growth opportunities in North and South America, India and Africa will keep this division busy in the foreseeable future. It was good to see Bruce Sheppard quizzing the board about the use of their auditors for non audit consultancy and then again, over the aged grey male accountants who comprise the board. Further renewal is to be expected. Another question over the validity of keeping retail footwear in the portfolio, was defended cautiously, in the light of flat retail conditions prevailing in NZ. The re-election of Messrs Mollard, Smith, and Maasland was confirmed, but one vocal shareholder opposed the appointment of auditors by the board, and long term members will guess who that was….. initials BS. Alan Best

The Scrip December 2013 8 Mighty River Power AGM 7th November

detected an air of nervous excitement at investment in its smart metering business, Questions from the floor were positive in Mighty River’s first AGM. A step into a Metrix. nature. Brian Gaynor asked at what stage Inew world for the seemingly many new In October MRP embarked on a $50 million was the Crown consulted/informed of investors attending their first AGM and a little share buyback to help prop up its share prospective new appoints to the Board – wary concern from MRP’s senior managers price which has been trending down since Answer, as a courtesy late in the process; as to what might be directed their way. Even its listing in May. Joan Withers told share- and whether the Crown received information normally so cool chairwoman Joan Withers holders there had been “a lot of external and from the Company not available to all share- seemed to have a little trouble reading her political focus on what is often referred to in holders. The answer is that monthly accounts autocue as she began her address. short hand as ‘poor MRP performance’ when are given to the Treasury to be included in Both Joan and CEO Doug Heffernan, in their the commentary is actually relating to our the Crown’s monthly financial statements. addresses to the meeting, strongly made company’s share price post IPO.” This is consistent with the prospectus statement and Public Finance Act, which the point that the company’s results are a That decline reflects the market view, but “at means that and Meridian good news story. The company expects to times there appears to be no clear connection also provide internal monthly accounts to meet its prospectus forecast EBITDA and between how a company is performing and the Crown. He later criticized this point in fair value adjustments of $498 million in the how its shares are trading,” Withers said. his newspaper column on the grounds that year ending June 30, 2014 and anticipates “What this board and management team corporate information should be available paying a first-half dividend of 5.2 cents per is fundamentally focused on is driving to all shareholders. While of course he is share. long-term value for our shareholders.” right, his article perhaps overlooked regular The company lifted net profit guidance $35 Doug Heffernan will retire in 2014 and the company briefings to institutional, but not, million to $195 million due to changes in board has engaged an executive search firm retail investors. the value of its financial instruments and to find a replacement. cheaper than expected interest costs, while Mark Trigg, General Manager Development Joan Withers, Keith Smith and Tania cutting forecast operating cash flow to told me that unlike at least one lines distri- Simpson, who all addressed the meeting, between $300 million and $320 million due bution company, MRP has no plans to move were re-elected as Directors. The Board to a bigger tax bill from its new Ngatamariki into grid-tied solar photovoltaic systems, as plans to appoint two new Directors. One, thermal station. It had previously expected they are not seen as cost effective. General to replace Trevor Janes who will retire in cash flow of $328 million in its prospectus. Manager Human Resources, Marlene December 2013, and a new appointment Strawson told me that the company is Forecast capital expenditure was cut to to bring the Board up to 8 members. In working through an industrial dispute over between $125 million and $175 million from conjunction with this, a resolution was random drug testing. The company is deter- $199 million in the offer document, to reflect passed to increase the Director’s fee pool by mined to operate in a drug free environment. lower spending on the company’s interna- $85,000 – no individual Director will receive Bruce Parkes tional geothermal investments in Chile and more. California, and potentially a small lift in

The Scrip December 2013 9 Michael Hill International AGM 30th October

HI AGMs are a distinctive mixture of family, Meanwhile Australia had increased its tax concessions to community, vision, promotion, and utter profes- attract and retain world patents, copyright etc into its Msionalism amongst directors and management. In own jurisdiction. The ATO predictably disagreed with the this 26th AGM we were reminded that it was the anniversary of the valuation of IP in a mere retailer. MHI engaged a bigger day that Emma (Michael’s anointed) set out to convert Canada. valuer and found the IP value to be even higher. The Now 11 years later, with 50 Canadian stores, the company ATO should now accept at least the original valuation, believes it has broken through the promotion barrier and but will no doubt, try to negotiate. In NZ the IRD has will experience strong profit growth over the next few disagreed with the franchise deductions now paid by the years. NZ shops to the Australian owners – MHI’s Australian Limited Partnership. This is a widely used ownership CEO, Mike Parsell gave his usual thorough review of perfor- system. PWC assured shareholders that no penalties mance which is available on the company’s website. The were due on either claim in the event of settlement. E 2014 year will be marked by: specialised bridal promo- & Y then explained that because there was no present tions and in-house consumer finance in USA, further obligation the disputed claims could not be provisioned development of ecommerce, 20 new shops, and 20% in the accounts, but noted only as a contingent liability. return on shareholder funds. Refits and openings will It was clear that both consultants and auditors were fully continue to be funded internally. A note of caution was briefed, and that communications with both tax offices sounded as Michael told us of Tim Horton’s Coffee shops’ had been open and cordial. We were grateful to MHI for 15 year wait for profit from his USA group. That group this full explanation, and assurance. With the growth in now has revenues of over $3b and over 4000 shops. the company the amounts, while material, are able to be USA is a very challenging market, but success there will absorbed. redound over the whole group. Shareholders approved a small increase in directors’ NZSA had previously telegraphed its concern over MHI’s fees, and the election of Gary Gwynne and Emma Hill differences with both the Australian Tax Office, and NZ’s proceeded without dissent. Emma, BCom MBA, who IRD. True to form Michael wheeled out not only the CFO started with the business at the age of 7, now blooded in to explain the history, but also the Consultant PWC, and tough international markets is clearly contributing to the Auditor Ernst and Young. Briefly, from 2004 to 2009, the governance, while Gary, founder of Colenso one of the ATO approved a scheme of franchise payments from the world’s largest advertising agencies, believes that MHI Australian shops to the NZ parent. It was known that will soon be the first truly global brand based in New when that agreement expired the Intellectual property Zealand. would need to be transferred to Australia the larger earner in the group. Accordingly, MHI gained a regis- Alan Best tered valuation and was surprised to find that it was $272m – concerned too at the funding requirement.

The Scrip December 2013 10 Ebos AGM 22nd October

NZSA proxies 404,385 Business Awards. He said Pharmac intend to manage all medical he Ebos AGM was very well attended, Mark Waller explained that getting the devices and consumables within NZ over and pretty upbeat, only 5 months after Symbion deal done in June meant they have the next five years, a world first. He added the Symbion EGM. Rick Christie, Chair, now started their financial year in an orderly that the experience working within the lean T and open NZ structure have given Ebos the reminded us of the “20 significant invest- way with clear comparisons over prior annual ments” that Ebos had made over the past accounts. knowledge and skills required to succeed in the Australian medical and pet markets. 12 years, the strategy being, always to be He said that in the recent road shows in NZ the leader or at least be number two in the and Australia, Australian analysts have been A video of their NSW $30 million complex market, rather than have growth for growth’s somewhat sceptical of how this small NZ Greystones, where 50,000 medicines can sake. He added that shareholders have had Company can come in and operate success- be picked per hour and distributed on time a compound return of 19% over the past fully in Australia. He also added that analysts to pharmacies throughout Australia, looks ten years something that Ebos are aiming to want an immediate win, which is not the way impressive. Mark said they need a lot of continue although it might be a challenge. Ebos, plays the game. volume to make that economic and such systems will be useful when the time comes Symbion has opened up considerable oppor- Mark stressed again the modus operandi of to run their New Zealand supply chain tunities for Ebos, particularly in Australia Ebos which is to provide the best service network. creating a major step up for the company possible and to be so effective that your including an eventual dual listing on the customers can’t do without you. Their market Ebos forecasts to 31 December, just over Australian stock exchange. share is around 58% in pharmacy wholesale $3 billion in total turnover, EBITDA just over Another significant milestone for Ebos was in New Zealand. Symbion have about a 30% $100 million and earnings before tax just being the “preferred respondent” selected by market share in the community pharmacy under $70 million and $48 million in net the Crown owned company Health Benefits market in Australia, however, he said profit after tax. They are on track for the first Limited. This process, yet to be finalised, chasing market share is far less important quarter. Symbion is going extremely well means that they will be the sole distributor than being profitable so this is an area where with no adverse surprises and the staff are of medical supplies to the nationwide District mindfulness is paramount. They are number knitting together well. Health Boards as well as pharmaceuticals one or two across the spectrum of providing Mark Waller emphasised the breadth of scale to some hospitals. This is an exciting and health logistics including 3PL (third party of the company, from pharmaceuticals, to important development for Ebos, opening up logistics or pre wholesale). Once pharma- marketing and distribution, animal health, further opportunities in the future. ceuticals become commoditised, manufac- and manufacturing, illustrating just how Christie wound up his presentation by turers use companies like Ebos and Symbion diverse the company has now become. mentioning CEO Mark’s Waller’s contribution to promote and sell their products, as the to the success of the company and the special cost of wholesaling within a country is just commendation at the recent Canterbury too expensive over a small range of drugs.

The Scrip December 2013 11 Sky City Entertainment AGM 27th September

his year, Sky City gave way to an income keep problem gamblers out, including the use of generating conference and moved its facial recognition software. Tmeeting venue to the Sky Theatre. Perhaps Questions from the floor included: this added to a sense of entertainment for share- • Dress codes – the higher the standard the holders who attended. Certainly with the usual lower the profit. (Ebos cont.) generous “goody envelope in their hands and • Premier card member privileges – only avail- However, he said they are ample refreshments, I did not hear any grumbles able to those who spend a minimum amount. still on the lookout for acqui- despite a crushed refreshment area. • On line gambling – prohibited by legislation sitions, and had recently Directors Bruce Martin (with a family bereavement) • Fraud by international itinerants – strong pro- turned down two possibilities and Rod McGeogh (supporting Bruce) were absent cesses to minimise because the companies did from the meeting. • Are staff paid living wage? – most earn far not meet their strict criteria. Chairman Chris Moller opened by advising that more Mark Waller clearly is looking he held 347million proxies (60% of total vote). There was only one question on the Long Term forward to the challenge of He noted that the share price was at a 5 year Incentive plan proposed for Nigel Morrison. driving Ebos, with the help high and disregarding world cup effects and the Inveterate meeting questioner Coralie van Camp of his team, to a bigger and adverse exchange rate, profit would have been up wanted to know if the shares could be voted before brighter future and clearly has 2.6%. The development of the Darwin casino had they were vested. The answer is no. As set out a good grip on the company gone well and the South Australian government in a “pulse” sent to NZSA members before the as it now stands a significant had signed off on the Adelaide refurbishment (part meeting, we will monitor how this LTI is executed. player in the top NZX50. of a $5billion Torrens river bank redevelopment. The retention of Mr Morrison seems to be critical All company resolutions CEO Nigel Morrison advised that the company was to Sky City’s growth. Mr Moller told me that the passed – Rick Christie as well funded for future growth. Currently, business company does have insurance cover against that Chairman and Sarah Ottrey in New Zealand is slightly up while Australia is eventuality and does have succession planning and Peter Kraus were flat. The $Aus/NZ exchange rate has not been in train to groom a replacement. He also told re-elected as directors. favourable. With the Auckland conference centre me that, while not ruling out the possibility, the Barbara Duff and Robin development stilled mired in the parliamentary company is unlikely to seek to take up one of the Harrison process at the time of the meeting, Mr Morrison new casino licences the Queensland government aggressively challenged those opposing the is planning to offer. With Adelaide underway and conference centre proposal. He noted that no one Auckland in the wings, that might stretch the else was offering to build a conference centre; and company too far. the prevalence rate of problem gambling amongst the adult population was only 0.3%, whereas the rates for hazardous drinking and smoking were 18 and 20%. The company will do all it can to The Scrip December 2013 12 TeamTalk AGM 17th October

ince the 2012 AGM on the 28th floor of news, the not so good is that the 14.7 million the Majestic Centre a number of things revenue translated into negative 0.7 million of Shave happened. First, there have been EBIT. some earthquakes in this region over the last CEO Dave Ware focussed most of his address few months and as a result the Centre, the not talking about numbers, but explaining that tallest office building in Wellington, is - under Farmside had not been in the good shape they going earthquake strengthening work. But let’s thought it was pre purchase after completing not dwell on that. due diligence and that quite a bit of remedial Then there was the Teamtalk purchase of rural work had been needed. This involved replacing ISP Farmside in December 2012, and lastly the a lot of the management and beefing up the Ultra Fast Broadband (UFB) fibre rollout is now help desk and support side of Farmside. It is well underway and gaining media attention. now back on track and starting to grow, winning Some people even have UFB connections! around 50% of the rural broadband initiative. It was Farmside and the UFB rollout that were Dave noted Teamtalk is not involved in the UFB, mostly discussed during this AGM. Farmside is but it is creating uncertainty and change in the very important to Teamtalk. Prior to Farmside, telecoms industry and Teamtalk, as a nimble Teamtalk had two main revenue streams, mobile niche player, can benefit from this. Dave Ware radio (2012 17.9 million revenue/2.6 million finished off saying that the outlook for 2014 for EBIT) and broadband (Araneo + Citylink 2012 Teamtalk is for steady but not spectacular growth 15.3 million revenue/5.9 million EBIT). Both and the current dividend would be maintained. segments seem to be in a slow decline with From the Teamtalk 2013 annual report, I always enjoy the frank commentary from Dave; Chair Joe Pope has Dave Wares head on 2013 revenue and EBIT down. Mobile radio is it is very similar to the “TeamTalks” newsletters a platter a mature industry and being replaced in part he sends out to shareholders - quite informal by the cell networks, and Citylink which has and matey. One thing confuses me though – Citylink from UFB? (Citylink will launch been a cash cow with its fibre networks, may is Dave (and Teamtalk) putting on the blokey new products but will not compete be coming under price pressure from the much male dominant manner or is it just a front? directly on price); and why no women cheaper UFB. There are no women on the board or in senior on the board? (we haven’t found one With just over six months trading to 30 June management, and no sign of that changing so we like). 2013 Farmside added another 14.7 million maybe it is a place just for the blokes. Meeting closed around 5pm and we revenue and the annual report noted that if a There were quite a few questions from share- blokes headed off for a beer or two. full years trading had been included, Farmside holders covering: how long before Farmside Martin Dowse would have added 28 million. That was the good is better? (recovery is underway); threat to

The Scrip December 2013 13 Heartland Bank AGM 1st November

NZSA proxies held from 24 members totalling one-off exceptions) have been improving covered crop financing rather than live- 740,000 votes and their liquidity was good. The “legacy stock. he meeting, attended by about 100 issues” had been cleaned up and he saw • When would they be changing the name shareholders was the first AGM since future expansion as coming from organic on the CBS Arena in Christchurch to Heartland Bank received its banking growth. Heartland’s lending targets three Heartland? They were not as they were T areas: consumer lending, rural lending and no longer paying for the sponsorship! licence from the Reserve Bank in December last year. Under the conditions of its licence business finance. • Would the new Reserve Bank require- the Heartland Bank must have a separate In responded to questions from the floor:- ments on high LVR mortgage affect the board with an independent chairman. So • Heartland had said it wanted to be the Bank? No, it was not binding on them former chairman Bruce Irvine has stepped most profitable bank but even if they as they had minimal exposure to house down from HNZ but now chairs the Heartland achieved a profit of $34m this year it mortgages which were not part of their Bank and HNZ now has Mr Geoffrey Ricketts would still only amount to a return of strategy. However, other trading banks as its Chairman. This doubling up of boards 9% on its assets compared with over were being severely impacted! Further- does seem a cumbersome and expensive 10% by the big banks. The company more, they had entered into an arrange- arrangement! was only a year into being a bank and it ment with Kiwibank for Heartland to act as their agent offering their house mort- Mr Geoffrey Ricketts gave an encouraging was continuing to make progress. gages. speech outlining the bank’s consolidation, • Heartland’s shares were below the net • Were they still offering to purchase profitable performance and improved tangible asset backing of 90 cents, so smaller share parcels at market price? dividend payments over the last year. He is the bank’s equity ratio too high? The Yes this arrangement was put in place to forecasts profit after tax to June 2014 to share price of 85cents was much higher frustrate an anticipated “low ball” offer be in the range $34m to $37m. He noted than last year and progress was continu- to smaller shareholders. Heartland had that their rating from Standard & Poors had ing. been obliged to supply the list of share- recently improved. Further acquisitions • Would they consider changing their audi- holders but did so using heavily water- were possible. The RECL agreement with tors next year? No, not yet. KPMG have marked paper to confound any attempt PGC over property loans, originally planned been doing an excellent job and there to generate an electronic copy through to extend for 5 years, had been terminated was value in maintaining some continu- optical character reading. Heartland’s early and settlement reached. He referred to ity for several years before considering offer should ensure that these share- a number of questions from NZSA sent in putting the auditing out to tender. holders with up to 10,000 shares gained advance of the meeting which he addressed • What is the joint venture shown in the a fair price. within his presentation. account cash-flow? This joint venture is with AA Insurance. It is a small but • Would he comment on their relationship Managing Director, Mr Jeffrey Greenslade, growing relationship with PGG Wrightson? Under the PGGW reported that the Bank’s asset quality was • What was their difference between live- brand Heartland continues to provide improving and that profits (adjusted for stock and seasonal financing? Seasonal financial services.

The Scrip December 2013 14 Cavalier Corporation AGM 19th November

n spite of its often humdrum AGMs, challenges with the shortage of wool Cavalier’s board has been active from the 2012-3 drought, continuing Iduring 3 years of poor results. It has imports from Australia and USA with their completed rationalisations of scouring exchange rate advantages, and a decline whose contribution has grown from in the price of lanoline from the scours. just over $2m 3 years ago to $5m for The chairman forecast a profit of $8-10m 2013. CEO Colin McKenzie has overseen after tax compared with a 2013 result of management change in Onterra Australia, $6.6m. Without the need for restructuring (Heartland cont.) closure of a spinning mill, consolidation of this could see a lift of over $5m after tax, With the election of directors the Chairman warehousing, and consolidation of Norman but it will still be a long way back to the declined a request from a shareholder Ellison’s tufting in Papatoetoe. Restruc- $18m after tax reported in 2011. for Mr Tomlinson, a recently appointed turing cost have been fully provided Questions covered: the new showroom director, to address the meeting before the at over $13m for the past 2 years. pitched at the rebuild in Christchurch; the voting, saying that it was not their normal From being a 100% wool manufacturer, flat building and renovation markets in practice and referred to his credentials Cavalier now has a range of offerings in Australia; the minor byproduct of lanoline listed in the annual report. This seems 100% synthetic at various price points. from scouring; the possibility of asset to be a less than satisfactory response; After paying out more dividends than it sales from the restructuring (nothing indeed Mr Tomlinson had risen to his earned in 2012, and declaring no dividend there!) and goodwill, which is tested for feet before the chairman intervened! The in 2013, it has reduced debt by $13m and impairment each year. NZSA asked a series election confirmed directors, Gary Leech, declared a first half dividend for 2014. of questions contained in the commentary Christopher Mace and Gregory Tomlinson, Alan James Chairs a diverse board with above, and was not surprised to hear that and KPMG were reappointed as auditors. in depth industry knowledge in Grant dividends are to be phased back from 3/ Robin Harrison Biel, CEO McKenzie, and himself plus year to two. long serving Graham Hawkins and Keith This has been an income stock which Thorpe, and governance expert Sarah prides itself in sticking to its knitting. We Haydon. Refreshment was implied in the may think that it is time for Cavalier to re-election of Grant Biel and Graham spin a new yarn, but its development of Hawkins who both said they would not high-end felted products from Onterra, stand again. and its new Habitat synthetic range mean Although Cavalier has done nothing it will continue to be a force in the Austral- to talk up its price, several commen- asian soft flooring industry. tators have recommended the share as Alan Best a recovery stock. There are continuing

The Scrip December 2013 15 Freightways AGM 31st October Sky Network Television AGM 24th October

ven though the FRE annual report introduces espite Sky TV holding its introduce later this year a service Sue Sheldon as “chairman”, I refuse to do so and annual shareholder meeting at aimed at IPad and smart phone Erather hope linguists and governance bodies will Dthe Langham with ample room users; and by doing so, tapping into a soon find an appropriate solution. Chair, Sue Sheldon for shareholder refreshment and new market demographic. Geraldine reflected mainly on the 10 years since IPO in 2003 engagement, by holding it on “Super McBride and Derek Handley – both at an issue price of $1.60. Since then (and including Thursday” (4 companies holding their with much needed digital technology the period from 1999, when Dean Bracewell became AGMs in Auckland at the same time) backgrounds – have been appointed MD) the company has been showing steady growth, they were always going to struggle to the board. enhanced by a number of acquisitions over the years. for numbers. Those attendees I There will be no special dividend this The fact that - not for the first time - FRE had most of spoke to had chosen this AGM over year. Just as well? Last year’s special their senior management (NZ & Australia) present at others on their perceived ease of dividend, whatever the justification, their AGM, suggests confidence in their delegation, access. was funded by increasing bank debt. supported by staff training & internal promotion. Chairman Peter Macourt and CEO There were few questions from the Of interest in MD Dean Bracewell’s report was the John Fellet, in their addresses, floor. We had this season’s obligatory fact that Information Management Business has reported on a steady year. Profit was one on the “living wage” (I have yet grown to claim approximately 30% of group revenue up 10%, but there are some clouds to meet a questioner who has read & earnings, in totals of $406m and profit after tax on the horizon. Sky faces increased the King and Waldegrave report of $40m for the year. With revenue and earnings competition from providers using and understands how the term was growth of approx. 4 % in the first quarter to 30/9/13, other platforms. While customer defined) and one about a failure in a one hopes the momentum in retained, so that the churn is down, net new subscribers MySky box. present dividend policy remains unchanged. were only up by 9000. Growth has Later, while congratulating John come from customers upgrading their Your undirected proxies were all voted in favour of the Fellet on the content on his share- subscriptions. So what’s the future? resolutions and the meeting was over in 30 minutes. holder letter, he told me that he is The only question asked was in relation to Kim Ellis’ John Fellet answers this in his “letter to a former employee of Warren Buffett re-election; that referred to news of that morning shareholders” in the company’s annual and he tried to follow Warren’s that the Australian entity, which had several years report. He defines the company as an philosophy of keeping shareholders ago acquired Waste Management, run by Kim Ellis at “entertainment delivery company”, well informed on the company’s the time, might consider flogging it off again in NZ. not a pay television company. Like prospects. Wouldn’t it be great if He answered that he did not plan to be involved so other companies with sophisti- other CEOs adopted this approach? that his existing board commitments would not be cated technology, Sky is exposed Bruce Parkes affected. to competitors using “disruptive Uli Sperber technology” (a new and cheaper way of doing things). Sky plans to

The Scrip December 2013 16 Trade Me AGM 30th October

his Trademe AGM was interesting as management staff to manage the growth. Interesting post AGM discussions suggests it was the first one after the Fairfax Voting on the resolution was by show of that, with Fairfax out of the way, Trademe Texit. Both the Chairman and the CEO hands. The resolution to increase the pool believe that they can get a larger chunk acknowledged that, for the first time, the of director’s fees by $150,000 to $800,000 of the significantly higher budget for print growth in Trademe’s general marketplace per annum was passed. NZSA voted against media charged to the seller by real estate had slowed to around 5% - but still growing. this resolution as it did not find any justi- agents presently. One assumes, Trademe However, their classifieds market (Real fication provided for a proposed additional will be willing to kickback the 50% of adver- Estate Cars, Jobs) were still showing good Director and disagreed with the premise tising costs back to the real estate agents as growth and plans were afoot to undertake that compensation had to be increased for done by print media to make this strategy some significant capital investment to refresh existing Directors from Fairfax continuing successful! technology and consider new ways to create as independents. All directors standing for Vinny Venkatesh growth. It was signalled that dividends re-election were confirmed by show of hands might be affected in the upcoming years. resulting in Sam Morgan being re-elected The current strategy was described as and Paul McCarney (an Australian technol- Defend, Find, Exploit. ogist with start-up company background) The current advertising campaign was cited elected. as a means to turn around the slowing Questions included request for clarification growth in the general marketplace. New around the direction being taken with avenues for growth are expected to come building new interfaces to allow easy access from: the acquisition of Life Direct – an online to Trademe for partners. The CEO gave an insurance aggregation and comparison site; assurance that this was necessary and that Holiday Homes booking site; beefing up the contractual measures were in place to avoid offering of “new” goods retail marketplace cannibalisation. I noted that the proposal by making it easier for retailers to set up and to undertake funded joint ventures was a manage shop on Trademe; expansion beyond new strategy compared to simple acquisi- New Zealand; and further acquisitions and tions of the past. The answer was yes—but possibly joint ventures to incubate comple- not totally new as the Cars marketplace had mentary services with a view to acquiring a joint venture component for operations. them or continuing as a partnership. There There was no clear answer to a question is also a planned expansion of middle about their planned dividend target.

The Scrip December 2013 17 The Warehouse AGM 22nd November

bout 250 shareholders were present an internal promotion has proven to be very useful experience and diversity to the at what was a fairly low key event. more effective (and less expensive!) than board. Sir Stephen Tindall also spoke as he AOutgoing Chairman Graeme Evans an imported “rock star” CEO – something was up for re-election. started by saying what a huge year it the NZSA has frequently pointed out to The only other important resolution was a had been. Nine purchases including Noel companies. The main points were: proposal to increase director’s fees. NZSA Leeming, 51% of Torpedo 7 (online retailing) • Keep the red core strong. This involves members had been alerted by email with and several smaller online retail, supply store refits, a real emphasis on staff full details and our views on this. The chain and specialist IT support companies. training, better quality merchandise, Chair explained exactly what was proposed international branded goods and multi- The Warehouse strategy is to be the number (basically a 4% increase plus provision for an channel promotion/purchasing. one multichannel retail via “bricks and additional director). I addressed the meeting • Grow non red to be as big as red. Devel- mortar”, online and direct TV. The intention and told the Chair that the notice of meeting opment of Noel Leeming and Warehouse is to grow other parts of the business to be was inadequate and shareholders needed Stationery was ongoing and further ac- at least as large as the core “red sheds”. full details if we were to make an informed quisitions would be considered. The Chairman had much praise for the team judgement prior to sending our proxies. This • Be the leading multichannel retailer. led by CEO Mark Powell and indicated that was taken in good spirit and the Chairman Online was coming on quickly, but off a they were an important catalyst in giving the acknowledged that he had had an earlier fairly small base. board the confidence to invest so heavily in “robust” discussion with the NZSA Chair on • Leverage group competencies and scale. the future. this matter. There was a commitment to do This would reduce costs and increase much better in the future. Sales were up 30% to $2.24b and NPAT 12% effectiveness by achieving synergies (in- The only other question/comment of note to $73.7. Operating cash flow was strong cluding brands) where possible, stream- was whether the company proposed to have at $93.7m and the dividend was up 5% at lining logistics and investing in people its full online catalogue available through 21cps. Looking forward, the Chair said retail and rationalising property use where each group division website and whether was showing an overall lift, but remained appropriate. very volatile. First half FY14 NPAT was likely pick up could be effected at any store in the The Warehouse continues to be committed to be below FY13 although full year should be group regardless of its branding. At present, to helping local communities and some of higher. No detailed guidance will be provided each website only covers its own offering the ways it does this were outlined. until after the Christmas trading period. and pick up is specific to a particular store. Sir Stephen Tindall gave a glowing tribute The CEO said that was under discussion, but CEO Mark Powell gave a dynamic presen- to the outgoing Chairman. The new Chair is not on the immediate horizon. tation where he ran through the four key to be Ted van Arkel, someone with a very elements of his strategy. His enthusiasm good retail track record. New directors John for the challenge was very evident, and John Hawkins Journee and Vanessa Stoddart outlined few shareholders could have failed to be their experience and why they were seeking impressed. He is a prime example of where shareholder support. Both bring a range of

The Scrip December 2013 18 Abano AGM 26th November

ased on a NZSA statement ‘pulsed’ to The Archer/Hutson/Reeves opportunist backdoor members, the news media predicted a proposal has been a distraction for the board and Bheated Abano AGM. Instead all was peace a material cost on all shareholders. I spoke in and goodwill because the Archer/Hutson/Reeves support of the board in its denial of the request putative takeover group was either, not present or for due diligence and affirmed that any bid should did not speak. Chairman Trevor Janes produced be down the Takeover code pathway where infor- a trump card by presenting an independent mation was transparent and all shareholders valuation from Grant Samuels that indicated a were treated equally. Brian Gaynor also spoke mid point valuation of $9.17 a share. This is well eloquently in support of the board. The only other above indicative Archer/Hutson/Reeves bids of question at the meeting asked when the board $7.15 - $7.80 a share. had received the Grant Samuel report (formally As Peter Hutson has a Abano’s businesses are in various stages of on the day of the meeting). maturity. Start-ups, Audio Australia and Asia are All resolutions were voted on by poll. All passed. stated intent to unseat Mr close to break even. Dental and some radiology Post this meeting, Archer/Hutson/Reeves, Janes and bring about are in an emerging and growth phase with rapidly through a media release, “unwound” their change in Abano, there expanding dental providing 69% of the company’s proposal. Unfortunately this will not be the end will be troubled times gross revenue. Mature pathology and orthotic of the matter. With Peter Hutson having a 50% businesses, tied to DHB contracts, offer steady share of the audiology business; and a stated ahead. As always, the cash flows while facing continual uncertainty over intent to unseat Mr Janes and bring about change shareholders will pay. the renewal of those contracts. in Abano, there will be troubled times ahead. As Looking ahead, the company’s half-year guidance always, the shareholders will pay. has EBITDA slightly down on the previous year Finally, Abano was the winner of the Institute – reflecting soft economic conditions in Australia of Financial Professionals New Zealand’s 2013 and New Zealand. The company, materially award for “Emerging Leaders Best Corporate helped by a television advertising campaign, Communicator”. Besides communicating with has outperformed other dental consolidators. external stakeholders, CEO Alan Clarke sees With 52% of income now generated in Australia, good communications as the key that drives the there could be a limitation on imputation credits culture the company has developed to glue its attached to future dividends. It is worth noting many parts together. the strong shareholder support displayed through Bruce Parkes 52% of dividends being reinvested through the company’s dividend reinvestment plan.

The Scrip December 2013 19 Port of Tauranga AGM 24th October

major objective of the company is to by 3.8 hectares, giving a total of 190 • Frozen meat exports increased by 8%. become the hub port for New Zealand. hectares. The rail sidings at Sulphur Point, • PSA virus saw kiwifruit exports decline AThe future for shipping is to be able the container terminal, have been increased 8%. to accommodate large ships, vastly more and can now load and unload three trains at • Total imports were down 3% primarily efficient in fuel usage and speed. They are once. due to reduced demand locally for ferti- therefore rapidly replacing smaller vessels. PrimePort Timaru now has all the necessary lizer and grain, due to the 2013 drought. Currently 4,000 container vessels are statutory approvals and Port of Tauranga will • Containers handled increased to 848384 common. In the near future 5,000 and 6,000 in December acquire a 50% stake in PrimePort TEUs. (Twenty-foot Equivalent Units) container vessels will visit New Zealand. Timaru and a concession to operate 100% The container terminal hosts 16 separate These bigger vessels need deeper channels, of the container terminal. It gives POT the international services, more than any other longer quays, more cranes, bigger container opportunity to marshal South Island cargo port in the country. Shippers are recognising yards, better port access etc. These bigger to be transhipped through Tauranga on its that Port of Tauranga offers a quicker and ships want large cargo exchanges, a fast way to overseas markets. more flexible route to international markets, turnaround and will not visit multiple NZ A significant purchase was the Gateside thanks to the frequency of ship visits and ports. Industrial Park adjacent to MetroPort in world-class productivity. A necessary port development is the dredging Onehunga. This 6.8 hectare property First quarter results project to accommodate the larger ships. To includes three large industrial warehouses, In contrast to the same period last year the this end, in March this year the Minister of an office building and more than two trading performance for the first quarter of Conservation granted consents to proceed hectares of vacant land, which will provide this financial year is: trade up 6%, log exports with the dredging. The efficiency gains of future options to expand services around the up 34%, and containers down 13%, largely the larger ships are estimated at more than existing South Auckland freight village. due to the lag in dairy exports associated $300 million per year for our exporters and Main points for 2013: with the botulism scare and also the loss of importers. • Total trade increased 3% to more than an import container service. Other Developments 19 million tonnes. Net Profit After Tax is the same as the prior In the financial year the company invested • Total exports increased by 6% to just corresponding period. over 13 million tonnes. $68 million in property, plant and equipment, The Kotahi freight alliance has told the port • Log exports grew 14% to just over 5.6 including increasing the berth length of the it anticipates a significant increase in export million tonnes. container terminal by nearly a third and volumes in the coming months. purchasing two new container cranes. One is • Dairy products increased by 27% to 1.6 already installed and the other, the seventh, million tonnes due to the consolidation will be commissioned in early 2014. of /Kotahi cargo through Tau- ranga. POT increased its Tauranga property holdings

The Scrip December 2013 20 Lyttleton Port Company AGM 8th November

ith about 40 attendees, Chairman Trevor consents for reclamation in Te Awaparahi Bay up Burtt got underway with the resolu- to 10 hectares, but they want to increase this to (POT cont.) tions and both Lindsay Crossan and Alan 30 hectares. A Power-Point presentation gave a Provided there are no significant W Grant were elected as Directors. In the case of good indication of where the port sees itself in market changes, POT expects to Alan Grant temporarily, while a search continues the years ahead and outlined 25 major projects achieve full year earnings in the to replace Rodger Fisher, who has retired perma- with 2018 as a key date for some. One important region of $77 to $81 million nently as chairman. Rodger received accolades aspect is recreational use of the inner harbour, Director Changes from both Trevor Burtt and CEO Peter Davie for something the locals have been anxious to have John Parker has been a director his considerable efforts whilst chairman which happen. He said there will be many hurdles for 17 years, 7 of which as included a most tumultuous time for the port. to cross before all of this will eventuate but he Chairman. He has decided to Trevor Burtt said it had been another strong seems confident of future success in dealing with retire from the Board. The new year, and emphasised future ambitious plans. the bureaucratic and public consultations. chair is David Pilkington. Kim He said $53.1 million had been received from There were a number of questions including Ellis has taken the place on the the insurance claims to date (from 2010). There “where will the future rubble come from for Te Board vacated by John Parker. are still areas of disagreement between the Awaparahi Bay?” Answer: Rubble has reduced Kerry Drumm port company and the insurers, which are being considerably – they do have a quarry and that, worked through in mediation. plus dredging should be sufficient to complete He said that the LPC is in a strong financial the reclamation. position but that costs have increased. He is Question: “What about the Port of Tauranga (who hopeful of dividend resumption in 2014 but this has now invested in the port of Timaru) stating is dependent on a number of factors. that it will be the sole port for New Zealand with Peter Davie gave emphasis to the continuing subsidiary ports around the country?” Answer: and steady growth of the port despite consid- The board do not agree with this prognosis as it erable challenges. The port will be getting a new is not in the best interests of New Zealand. LPC is service “next week” shipping to the USA and well positioned to become a major port and could Europe. Coal has dropped but the approval of be aligned with other ports, however their “plate Bathurst Resources to start mining will fill that is full for the foreseeable future”. gap over time. The car volume continues to grow. In answer to a question about the insurance Resources are being consumed by the insurance claim, it was emphasised again that mediation claim, one of the largest ever. He spoke enthu- is continuing and they know exactly what the siastically of their twenty year plan to develop re-instatement and redevelopment will cost. the port, in response to the growth of vessels Barbara Duff demanding much larger capacity. The port has

The Scrip December 2013 21 Metlifecare AGM 24th October

etlifecare has gone through million was more than covered by institutions had pressured Metlif- a significant reconstruction “Change in fair value of investment ecare to change its valuers to bring Mphase in the year to 30 June properties”. This accounting it into line with other companies in 2013. Shares on issue have increased treatment is confusing but was said the industry. Different methodology from 144 million to 207 million, to be forced on all retirement village in terms of present value discount largely through two takeovers for companies by the application of rates, time scales and occupancy shares, and a cash share placement. international accounting standards, and growth rates had apparently In addition the proportion of shares over which they had no control. A given rise to the need to reverse in Metlifecare held by Australian- better measure of performance was previous years’ over-valuations. based Retirement Village Invest- said to be operational cash flow A colourful feature of A dividend of 3 cents per share ments Ltd has reduced from 84% which at $60.8 million was nearly had been declared. In answer the meeting was the to 37%, mainly through dilution, double the previous year. to a question from the floor, the attendance of Alastair with an announced intention to sell Reference was made in the Chief Chairman said that no detailed its remaining shares on the open Duncan, Leader of the Executive’s address to the buoyant consideration had been given to market. (and possibly over-priced) housing future dividend payout ratios. No Service and Food Work- The acquisition programme is market. Any downturn could have forecast of future profitability was ers Union, supported by reflected in the balance sheet, with an effect on the company by making given. eight of the company total assets increasing by some it more difficult for people to sell A colourful feature of the meeting employees in matching 50% to $1.904 million, making their homes in order to buy licenses was the attendance of Alastair the company the second largest to occupy, and on valuations of Duncan, Leader of the Service and T-shirts. in the retirement village sector. investment properties. However Food Workers Union, supported by Non-development related debt has the increased financial strength of eight of the company employees been eliminated, and the company the company gave several options in matching T-shirts. When Mr sees itself as well-positioned to available to cope with any such Duncan highlighted the low pay achieve its development plans for adverse events. rates for workers in the industry, two more villages in the next year A feature of the accounts was a write- the Chairman said he had sympathy and completion of the Poynton down in the values of investment with their concerns, he regarded project while holding a landbank for properties in the previous 2011/12 staff as the company’s greatest over 1,000 units and care beds. year of nearly $100 million asset, but it was all tied up with Total earnings for the 2012/13 year compared to an increase of $59 the Government and the financial were $114 million, but some $63 million in 2012/13. In discussion support it gave to the industry at million of that was a one-off gain with Chairman Peter Brown after large. on acquisitions. The remaining $57 the meeting, he explained that Bill Jamieson

The Scrip December 2013 22 PGG Wrightson AGM 15th October

here were empty chairs at this AGM Although small as far as contribution is and services, and a full range of farmer because the Ebos meeting was at concerned, irrigation has proved to be a needs. Texactly the same time. Sir John growth area and has a positive outlook going The new financial year has started well with Anderson covered the results and the forward with a recent acquisition confirming strong prices for lamb and dairying. dividend of 3.2 cents, with the promise that this and further investment planed. Formal Business dividend payments would be continued. He Wool has been re-integrated into the Sir John Anderson having announced his made it clear that the profit performance company structure, thus realigning the intention to stand down was replace by Alan was affected by environmental issues, like company with its grass roots customer base. the recent drought. Balancing that was the Lai, the senior Agria representative on the Mr Peter Newbold has been appointed as the increased dairy pay-out forecast for the new board, as Chairman. This was announced General Manager for Real Estate with the season which was anticipated to impact without any prior notice and was not responsibility of growing this division of the positively for the 2014 financial year. subject to any discussion. Alan Lai is not an company. This service to the farming sector independent director. His coverage of the financial performance is seen as being basic and important. included the balance sheet write-off of Sir John confirmed that proxies entrusted Grain and Seed suffered, particularly in $321.1million of goodwill that was a legacy with the Chair and board members Australia as the residual effects of one of of the merger that created PGG Wrightsons amounted to 58%, which was rather inter- the most devastating droughts in Australian Ltd. He paid George Gould the compliment esting as Agria Corp have a 50.2% holding. history continue to impact. Overall the grain as a steady and focussed executive who The association had 1.783 million undirected and seed division experienced an increase in guided the company through a difficult time. votes entrusted to it. All were voted in favour volumes but with lower margins. of the resolutions. Mark Dewdney, who has only just recently Mark Dewdney also commented favourably taken over as the CEO, came across as an Mr John Nichol was appointed to the board. about the future potential for South America accomplished knowledgeable leader. He He will stand for e-election in 2014. with particular focus on Uruguay, Southern covered the finer detail of the company’s Mr Trevor Burt, Lim Seang Seah, Wai Yip Brazil and Argentina geographically. performance. The company’s profit perfor- Sang, Kean Seng U were all nominated for Commercially, irrigation and seeds were mance of $14.6million was down noticeably directorships and were duly elected. identified as having an important future. on last year ($24.4m) due mainly to the The newly appointed Chairman, Alan Lai A profit forecast of $52-54m for 2014 would impact of the drought which was reflected in pointed to the considerable opportunities in be supported by a programme of staff devel- lower prices for livestock and export numbers. China for PGW, as China’s need to import opment, to establish a positive company Livestock exports are not confirmed going food was growing annually. One got the culture. PGW recognises the need to develop forward. Debt was reduced by $21.0m and impression he would be very capable at an better customers in dairying, and to build on cash flow was steady at $39.0m. international level, but be very dependent the grain and irrigation operations. This will Retail however, was a star performer and has on Mark Dewdney at the local level. involve computer links between customers benefited from the opening of new stores, and staff to improve knowledge of products bring the NZ total to 100 outlets. The Scrip December 2013 23 Questions technical and product solutions, In answer to an NZSA question, Sir supplemented by IT support. John Anderson confirmed emphati- NZSA’s question on R&D was also cally that the board had rejected taken up by Mark Dewdney. The outright the option of splitting the company operates an R&D facility company into two. at Kimihia near Lincoln College, Vector AGM 22nd October The relationship with the Heartland which is vital to the seed and grain Bank was confirmed as satisfactory, business. It does so in conjunction o stay ahead of ones competitors the and an important part of customer with other research institutions in chairman said Vector will have to focus service. New Zealand (Crop Research also Tmore on technology and innovation. Alter- at Lincoln) and offshore organisa- natives to centrally generated electricity, like The development and growth of tions. The co-operative results are solar power, are becoming more attractive. the company’s business in South beneficial to all parties. America was seen as an area of If Vector to grow in the future, it will be around opportunity, as time and funds it was easy to conclude that the core business units and expertise. There is permitted, especially in Uruguay, also a need to make better use of their assets. the Agria appointed direc- but also in southern Brazil and To consider any major acquisitions will be difficult, northern Argentina. tors appear to have little em- because overseas interests are prepared to pay In response to a question on the pathy with the core business a much higher price than what Vector considers pension fund, it was the company’s of the company. to be fair value. opinion that with a confident view The CEO stated the company is putting of the future and an increase in tremendous effort to develop and keep their profitability no longer hindered by At the conclusion of the meeting key employees and claimed all staff are being bad debts or droughts but bolstered and with the advantage of some paid the living wage. Another major initiative is with better commodity prices time to think it over, it was easy to focussing on safety issues within the company (dairy and lamb in particular), the conclude that the Agria appointed as the new laws being proposed will penalise companies obligations were well directors appear to have little heavily those who do not have a program in covered. empathy with the core business place. of the company. They are there One shareholder used a show of Des Hunt mainly to ensure Agria maintain hands (only 7) to indicate the slide control at board level, rather than in farmer loyalty towards PGW, to contribute to the commercial and and Mark Dewdney acknowledged technical direction of the company. the point, raised through internal Max Smith surveys and evaluations. PGW aims to increase the education of field representatives to include

The Scrip December 2013 24 NZ Windfarms AGM 26th November Skellerup Holdings AGM 30th

nnual meetings of NWF shareholders Derek Walker, who told the meeting he October are a rather doleful experience. had had his arm twisted to take on the n the 12th AGM of SKL, shareholders learned The only constants are an ever- role. Vector CEO Simon Mackenzie will A of the sudden resurgence of rubber sales after dropping share price and a chairman’s be the deputy. Director Michael Allen the summer drought, while pumping, and address that suggests the only solution will also retire later this year. No replace- I plumbing products in USA remained subdued. is to keep digging a deeper hole. That ments were announced. When asked if said, even those at the meeting critical the Board had identified the skill sets they Cashflows remained strong enough to sustain of NWF’s performance do not blame poor were lacking (and would look for in new the 8c full year dividend. Potential exists in North management; just that the company has directors) Mr Walker said they had not America far above SKL’s current tiny market been dealt a bad hand with: a lower than considered it. share; and in Asia with facilities near Shanghai, and Thong Nhat in Vietnam. Christchurch remains expected capacity factor (15% lower Mark Peter Evans offered himself for the “brains trust “ of SKL, and the new centre at than neighbouring farms), below average election as a director. I asked Mr Creech if the Wigram Industrial Park, is designed to consol- wind flows and from the wrong direction, the board supported the nomination. He idate production and product development. a locked in high transmission contract was non-committal. Mr Evans has no public with Powerco and ongoing noise litigation profile and no experience of governance SKL also plans to take advantage of the high dairy with the Palmerston North Council. With in a listed company. I voted discretionary payouts. a flat demand for electricity, the risk of proxies against his appointment. Shareholders were also interested to learn of political intervention in the market and no Voting on the resolutions added another the spread of SKL’s Deks plumbing and roofing prospect of a dividend, it is little wonder hint that all is not well at Windfarms. products, with a Head Office in Melbourne, 7 that the share price is at 6 cents and still Setting of the auditors’ fee was passed by branches throughout Australasia, 9 in Europe, dropping. a show of hands. In a poll for election 10 in North America, and 5 in South America. To Chairman Wyatt Creech and CEO Chris of Directors, Michael Stiassny was most present, this business had previously flown Sadler, in their addresses to the meeting, re-elected with 94.7% of the vote; Mark beneath the radar. repeated their reports in the company’s Evans received only 15.6% of the vote Questions ranged over the old factory in Woolston - annual report. Both made the point that and was not elected. Simon Mackenzie to be replaced by “project Viking” at Wigram, staff they believe the current share price was re-elected but with only 54.6% of the development, and the couplings business based in grossly under represents the company’s vote. As Mr Creech and Mr Stiassny held Italy. The re-election of Sir Selwyn Cushing, who value. However, Mr Creech said that the 60% of the proxies between them, this had overseen the recovery of the share from 54c board has decided against a share buy suggests that Mr Creech voted his chair- to $1.64, and the reduction in debt from $115m to back. There are not the funds available man’s proxies against the re-election. Or $2m passed predictably. This is a small and diverse and further, the company is unable to did he just make an honest mistake and board with a balance of financial and engineering raise more debt from the banks. tick the wrong box? skills. It will need to provide refreshment in future, Mr Creech retired at the end of the Bruce Parkes but at present shareholders are satisfied with its meeting. His replacement as chair is close-knit structure.

The Scrip December 2013 Alan Best 25 Kathmandu AGM 20th November Pumpkin Patch AGM 20th November athmandu’s meeting at the Stamford Plaza, Auckland was an Freeman, chairperson indicated that the company was facing very low key. The dozen shareholders who turned up were tough competition in its key markets of Australia and New Koutnumbered by analysts and other interested parties. One JZealand. Sales for the quarter to date have not improved on the shareholder flew up from Christchurch but others were perhaps corresponding period last year. They expect this year to only match put off by the CBD location and the non-controversial nature last year’s profit of $5.1m of the agenda. This allowed ample opportunity for in depth She also highlighted the transformational change the company discussion with all Directors. was still going through since the closure of the USA and UK stores, Unlike some retailers, Kathmandu has enjoyed an impressive yet maintaining a strong wholesale and online presence in these 94% increase in share price reflecting record returns for the overseas markets. The largest market is still Australia – 67% of 2012/13 year. Chief executive Peter Halkett told the meeting sales. sales rose 0.9 percent in the first 16 weeks of the 13/14-year. During the year Di Humphries (ex Glassons) was appointed Design Not the news the market wanted to hear and the share price Director, and later appointed CEO in August of this year. She has dropped in response. However, the first quarter represents only been instrumental in changes for improved product range and new 20% of the first half results. It all rests on the Christmas and designs, which are now starting to appear in the stores. Associated January trading period. with this has been changes and broadening of the supply chain from The company remains on track to open 15 new stores in the the garment manufacturers. There has been some disruption to the 2014 year, mostly in Australia where there is considerable oppor- supply chain, as well as the floods in Asia which has lost sales tunity for growth. Further expansion of the company’s on-line Reorganisation cost at head office and staff reductions have also sales channel is planned. affected last years result. All resolutions were passed without dissent. Chairman John Reduction of bank debt is a priority where stock levels are too high, Harvey held proxies for 70% of the issued shares. In regard which affects the level of debt. Meanwhile, no dividend is proposed to the performance rights issued to Peter Halkett and Mark until the level of debt is reduced. Todd, I ascertained that E&Y are responsible for managing the The benefits from the structural changes being made would not be ‘comparator group’ process on which the rights are assessed. seen till late 2014 and full benefits in 2015. Of most interest at the meeting was the naming of Trade Me There were some bright spots – online sales at 16% of total sales chairman David Kirk as a non-executive director, with the were ahead of most other retailers and the revamped website intention that he become chairman in early 2014. positions the company well in this growth segment. Wholesale Although Peter Halkett is working from Melbourne, there is no and International businesses are growing with 300 locations in 20 intention to move the company’s head office from Christchurch. overseas markets. Further, in 2015 the AGM will be held in Christchurch for the first Several shareholders expressed concern that it was taking so long time. for the company to recover and recommence dividends. Bruce Parkes Noel Thompson.

The Scrip December 2013 26 Barramundi Fund AGM 17th October

NZSA Proxies from 18 shareholders. to lead clients towards this listed fund, and emphasised the high dividend yield did listair Ryan Chairman since September that the market tended to view these smaller represent a capital return as well as a 2012, explained that BRM has a cap stocks as higher risk and more volatile dividend return from the portfolio. Shares specialised investment direction whose than the market at large. bought back go into treasury stock, and A some are then distributed to shareholders as only comparator is the Total Shareholder Alistair also commented on the performance Return of the small caps industrial index in fee paid to Fisher Funds for achieving a return part of the dividend reinvestment plan. The Australia. The out performance against that above the bank bill index plus 7%. Half of capital return portion of the dividend does index at 19.9% against 8.4%, allowed a this is taken in shares, priced at year end, compensate shareholders for the apparent 14.25c/share dividend. Some shareholders but he reminded shareholders that perfor- lack of capital appreciation. were unimpressed. The market cap of the mance fees are not earned when the results Directors Andy Coupe and Alistair Ryan were company is only $83.8m against a Net Asset are below the benchmark, and the fee itself both elected and joined Carol Campbell and Value of $96m. Its p/e of 4.9, and dividend is also scaled back. Carmel Fisher in a relatively new board, yield of 9% make it chronically undervalued. Both Carmel Fisher, and Frank Jasper which has approved a slightly larger portfolio The Chairman suggested that because commented on key stocks in the portfolio, to hedge the risk inherent in any one of the brokers and other market participants often which are well covered on the BRM website small cap stocks. ran their own funds they were less inclined and annual report. In question time Carmel Alan Best Marlin Global Fund AGM 31st October he following summarises the meeting highlights: under review the direction and investment objectives to achieve a Board consolidation – Alistair Ryan in 2nd year as Chairman and better balance of risk and reward. Currently reducing cash levels and TAndy Coupe, appointed March, to complement Carol Campbell positioning to larger cap stocks. as independent directors along with Carmel Fisher. Dividend policy of quarterly dividends based on 2% of NAV to be Fisher Management – New portfolio manager and enlarged experience maintained. investment team contributed to an improved performance and profit Fisher Funds management objectives is for global investments to be of $9.5m ($12.0 loss previous year) giving a total shareholder return managed from NZ. This was different from most competitors who of 12.2% for the year. out source management to overseas fund managers with higher This follows on from last year’s motion by Elevation Capital to wind funding costs. up the company to gain value from the 19% discount of share price to Roger Garrett - Senior Portfolio Manager and Manual Greenland (USA net asset value. Following a complaint, the NZX inquiry into matters portfolio) spoke of the total review of every stock held, thorough due arising from last year, have been satisfied and the investigation is diligence, and monitoring to ensure they met the objectives set. now concluded. The Chairman said that the new board was working Several changes have been made including a more concentrated in better harmony; and the investment committee has constantly weighting to Europe and USA.

The Scrip December 2013 27 Precinct Property AGM 7th November hairman Craig Stobo addressed a generally quiet meeting with most shareholders happy to be reminded of the positive progress that had been made during the year. CPrecinct’s total portfolio grew to $1.64b. An increase in NTA of some 12%. NPAT was $157.5m including a revaluation gain of $46.3m, and the more important (for property (Marlin cont.) company investors) net operating income was up 14% to $58.3m. Dividend lifted marginally to 5.12cps. The company is predicting a strong FY14 with dividends expected to rise 5.5%. In reply to a question on expanding the capital base the Chairman said The Chair highlighted a reduction in insurance cost of 12% and ongoing emphasis on ensuring that the Board regularly reviewed properties had good seismic performance – a theme that has been repeated in all property Capital Management to improve investment companies in recent times. He commented on the successful equity raising of shareholder value. The discount to $62.5m and while acknowledging that the SPP method used was not everyone’s choice (the NAV is still 17% and that investment NZSA for instance), he claimed in this case it was more cost effective than a rights issue and performance is the 1st priority to that the board had considered all options carefully. (NZSA would dispute that for an equity get a better balance to share price. raising of this size). Share buyback is still an effective CEO Scott Pritchard discussed the year’s activities. He said Wellington leasing had been management tool for shares to strong. The acquisition of the Downtown shopping centre in Auckland gave the company an be issued to Treasury stock and unparalleled development footprint and architects had been engaged to devise a master plan reissued under the Dividend for the property. He also highlighted the acquisition of HSBC House and the completion of the Reinvestment Scheme. ANZ centre upgrade on time and on budget. It appeared that members present The company’s properties are 97% leased (the best for 5 years) and the weighted average were satisfied with the changes lease expiry is steady at 5.5 years. Investment bias remains towards Auckland and the focus made to Board & Management. is on client relationships and sustainability. The current market is the strongest it has been Several questions were raised on for some time and Precinct expects demand for quality space to be strong over the next policy and performance. The Fund twelve months. is run on similar lines to Barramundi There were few questions. One shareholder asked whether the company was over exposed with the same Directors. in Wellington with so many companies relocating north. The company said that government Noel Thompson requirements underpinned the Wellington market and quality buildings such as those Precinct own had steady tenant demand as clients relocated from inferior and less seismically sound buildings. Resolutions to re-elect Craig Stobo and Graeme Horsley were easily carried. John Hawkins

The Scrip December 2013 28 Contact Energy AGM 15th October

eld at the Silks Lounge at Addington down completely after 2017, it would release geo-thermal utilisation from undeveloped Raceway Events Centre, this meeting a substantial generation capacity into the fields although environmental issues do Hwas attended by approximately market. He did believe that a total closure restrict the potential considerably. For the 150 shareholders, who enjoyed a tradi- was a likely prospect. present, about 10 to 15% of New Zealand’s tional Maori welcome extended by director CEO, Dennis Barnes, developed some of the electricity generation is from geo-thermal Whaimutu Dewes and a waiata sung by the matters raised by Grant King. He made the plants, which could easily be doubled if senior management team. This introduction point that the increase in electricity prices the need arose. Wind generation is more of Maori culture was clearly appreciated. was due largely to the increases in trans- expensive than geo-thermal generation and The chairman, Grant King presented an mission and distribution costs and not to doesn’t produce if the wind isn’t blowing. address that was absent of glamour, contro- increases in the cost of generation. As NZSA proxy, we suggested that the versy and the unexpected. He confirmed The churn factor, which detailed the loss and company may wish to consider polling rather what most already knew, which was that addition of customers, was about equal and than show-of-hands in the future. In addition, the major re-investment program was now the overall customer numbers was stable. we reminded the board of our policy to renew largely completed and that the expend- He made the point that there were about the auditors after 7 to 8 year tenure. The iture for the next twelve months would be 34 distribution areas in New Zealand and answer to this question was to be expected; moderate, mainly completing the last of Contact had logistical advantages in some 26 that it was a requirement of auditors that their upgrading program. He made specific of them. The opposition parties announced the partner delegated had to be changed mention that the forward demand for policy of creating a NZ Power control and on a regular basis and that there was no electricity was not expected to increase and administration entity was very questionable involvement from the previous incumbent. would be static. He was not supportive of the and it was difficult to see how the stated Sue Sheldon, a director, endorsed Contact’s Labour Greens policy of creating a central savings of $500 - $700 million dollars could view after the meeting, but observed that buying mechanism, which would clearly be achieved. This amount has since been it was difficult to make a change, because change the dynamics of electrical supply and recognised as incorrect and withdrawn. there are only four major accountancy firms not necessarily in favour of the taxpayer. The in New Zealand capable of doing the job. Three resolutions: the re-election of reduction in capital investment, the sale of Whaimutu Dewes and Karen Rose as directors Following the meeting, Canterbury Chairman non-core assets, the completion of upgrades and the setting of fees and expenses to the Robin Harrison, and I had an extended and the stabilising of their business has auditors, were passed without issue. discussions the Grant King, Sue Sheldon rewarded shareholders with an increase in and Paul Ridley Smith all of whom appre- Most shareholders’ questions had been dividends to $0.25cps for the current year. ciated our presence and our cause. He did not make any commitment to future covered in the presentations, but Peter Max Smith increases. Heffernan’s enquiry over the company’s vision for geothermal and wind power With regard to Tiwai Point aluminium smelter was interesting. In Contact’s assessment he noted that, if in the event it was to close there is considerable potential to increase

The Scrip December 2013 29 Chorus AGM 30th October

he Chorus AGM held in Wellington legislated the demerger. The consequence of that it offered a good capital management employed more technology than most lowered EBITDA and increase in risk margins option for a small price (3% discount) and Tother Wellington AGMs. Both the applying to both share price and ongoing allowed small shareholders to build up their Chairman and the CEO read their scripted debt raising was highlighted repeatedly. stake. The DRP is expected to be on offer presentations off a teleprompter. And there Chorus management does not believe that indefinitely. A follow-up query asked if there was a professional broadcast crew streaming CC’s benchmarking was a reliable method was likely to be a share buy-back option for the proceedings live on the web. Members of pricing. They point out that the proposed small shareholders. The response was that who did not make it to the investor briefings copper UFB pricing was already heading although nothing was planned, there may be in Auckland and Christchurch might have down. Chorus believes the government consideration in the future. managed to view a webcast, or could do so in should legislate to protect the pricing of A question from last year’s AGM was repeated future. The web presentation unfortunately copper, and they will pursue the option of by a senior shareholder about his preference does not allow for two-way interaction. cost-based pricing which is always available for A4 sized reports rather than the tabloid Both the presentations re-iterated that to challenge CC decisions. style currently produced for easy readability. that UFB rollout was progressing to plan. Re-election of directors was by poll and The Chairman demurred, indicating that a The main focus was on the concern about Sue Sheldon (current chair) and Clayton non-glossy option was much less expensive, the upcoming Commerce Commission (CC) Wakefield (a communications technologist) and that they produced only 3000 hard copies ruling on copper UFB pricing. have been confirmed. as most shareholders opted for electronic The main argument from Chorus was Q&A was surprisingly brief. A question was delivery. that the CC decision went against the key asked about why dividend re-investment Vinny Venkatesh policy intents of the government when they plan was implemented. The response was

Vital Healthcare Property Trust AGM 12th November s a NZSA proxy representative it was a much easier to exercise discretionary voting than in the last 3 years as there was only one resolution for the reappointment of Chairman Graeme Horsley. AIt was also a very quiet meeting compared with recent years. Seventyfive percent of the assets are in Healthcare properties in Australia. Total return for the year (capital appreciation and dividend) was 20%. Gross income increased including completed Brownfield development on existing sites in Australia with further in the pipeline. Quarterly dividend increased to 7.9cent per unit for 2013/4. The recent 1 for 10 cash issue has reduced the borrowing ratio to 38%. Although the Trust has outperformed the NZX Property Gross Index it has the highest premium to NAV reflecting the long term rentals of Healthcare assets. Noel Thompson

The Scrip December 2013 30 AWF SGM 18th November Bathurst AGM 31st October

his special meeting was a “one stop shop” it had been his was the most security conscious AGM I have been called to give the go-ahead looking to expand into white- through. Four security men at the ground floor lobby and Tby shareholders to spend collar recruitment for some Tone escorted me up and waited till I registered. The guard up to $36 million buying white- time and was in negotiations would not confirm if they were expecting the disgruntled Greens collar recruitment agency with Madison for two years. or Forest and Bird. Madison Group in a deal forecast Because of the differences the annual report covered only the two months to June 30th (per to boost annual earnings by half. between blue-collar and white- accounting standards) following NZ incorporation of the company Fortuitously, this meeting was collar recruitment, AWF won’t completing its move from Australia. However, a proforma P&L for held a week after AWF had merge the operations of the two full year was been made available to show a full year picture. entities. reported a bleak 19 percent slide The big news was the Environment Court approval for Escarpment in first-half underlying profit after Huddleston said, “the Madison Coal Mine. While it is full steam ahead for final council signoff and a predicted lift in Christchurch business is to a degree counter- preparatory civil works and sub-contracting to commence mining demand didn’t eventuate. “We cyclical to AWF, in that, as in the new year, management is wary of the fact that there is are finding the New Zealand the economy strengthens, still a chance of an appeal for up to 50 days from the court business environment at the the temporary labour market decision. In other good news -- the estimated coal reserves moment both confusing and becomes more challenging whilst have increased during the year and a reversal of impairments disappointing and undoubtedly permanent recruitments takes has improved the balance sheet. Reserves are $13.8M cash somewhat different than the the fore. Madison spans white down from AU$53.8M at the beginning of the year. Spending has seemingly hyped up comments collar temp, contracting and been mainly on legal expenses and capex to prepare for speedy about the economy throughout permanent placement, and is production at Escarpment and acquisition/improvement of other the country being on a roll,” therefore well-placed to benefit.” assets. The expectation is that company will become profitable chairman Ross Keenan told the Currently debt free, the board during this year. meeting. is comfortable with AWF’s debt The Managing Director’s presentation took place after resolu- Madison is forecast to lift AWF’s level growing to $30 million in tions were passed by show of hands and the AGM meeting was underlying earnings to $8 million the first year (this may lift by a closed. All the resolutions were passed by show of hands except in 2015 from $5.4 million in further $6 million if the earn-out for Resolution 5 (placement facility) which had been withdrawn the year ended March 31, and targets are achieved) and will pre AGM due to technicalities. This included Dave Frow and earnings per share are expected consider whether to repay the Craig Munro being re-elected and a facility to privately place to climb to 30 cents by 2015 debt from its cash-flow or raise 104,887,100 shares without further shareholder approval. Under from 20 cents in 2013. new equity to do so once the a long term incentive plan, approval to provide Hamish Bohannan CEO Mike Huddleston said acquisition has been bedded in. (MD), 1,845,992 shares were also approved. There were no because AWF had lost some Bruce Parkes questions from the floor on any of the resolutions. business, as it could not offer

The Scrip December 2013 31 NZ Oil and Gas AGM 29th October

hairman’s address was upbeat with the above the directors were not of the opinion that announcement of 6c/share dividend, any more monies should be distributed. Cputting to rest the Pike River issues. The second motion, that shareholders express The immediate future is also positive with a their dissatisfaction with the way in which the (Bathurst cont.) government that is very supportive of oil and directors managed the company’s investment in gas exploration. Discoveries on two onshore MD’s report highlighted the fact Pike River Coal Ltd and the company’s response wells in Indonesia and an exit out of Tunisian that coal from the 3 operating after the explosion, was countered with the fact operations were announced recently. NZOG has mines and the new Escarpment that directors of Pike River and other directors cash reserves of around $160M and is expecting project is expected to ship in 1 from NZOG at the time had moved on. to maintain a similar dividend of 6c next year qtr 2014, mainly to Japan and The third motion was for NZOG to undertake (9%) while planning to spend about US $35 India. There is also a significant additional spending to improve its health and million per year on exploration. The next 18 domestic market providing safety practices. Andrew Knight responded that months will see a high level of drilling activity energy to dairy and potash to an independent report on contracting out and with potential for some good finds. Although cement industry, which will help workplace safety had already been completed annual report, using typical industry reporting mitigate exchange rate varia- and this included ethical use of workforce by norms, lists probabilities at around 50%, some tions. Hamish highlighted that contracted 3rd parties. Actions have already of the sites have an expectation of a higher Bathurst’s Escarpment mine been taken to improve the safety culture, with chance of success. commitments would result in a further investment in plant and staff training. Averil Bramley a shareholder took the floor to $21M commitment to support Alan Dick queried the boom and bust nature of table three motions which had been provided in Heaphy estate conservation drilling activity in New Zealand and wondered advance to the management. (via DOC), up to 225 direct jobs whether suitable planning could be undertaken and a further 1000 ancillary First motion was around whether NZOG would to operate a continuous programme. Andrew jobs in to support to the West pay the reparation order for Pike River families indicated that lack of drilling vessels in New Coast people, economy and the of around $3.41 M ordered by Judge Jane Farish. Zealand contributed to this. There was already environment. CEO Andrew Knight responded that the decision co-operation among drilling operators in NZ in Hamish has since appeared on was not binding on them as they were not a party the next 2-3 year horizon to ensure continuity TV3 programme “The Vote” to the proceedings. He pointed out that NZOG for as long as possible when drilling vessels are about the mining debate. had already provided $25M for maintenance of in place. Next 18 months will be critical with the operations immediately after the explosion and Vinny Venkatesh expectation that 2-3 wells out of 13 planned a further $1M directly to trusts set up to support drillings would give rise to drilling activity longer affected parties ($500K directly and $500K via term. Pike River Limited). While the bulk of insurance monies went to secured creditors, $7M was also distributed to unsecured creditors. Given the

The Scrip December 2013 32 (NZOG cont.) Auckland International Airport AGM 24th October Brian Ralston asked as to whom had been held IA produced a very solid result risk when looking at new developments. accountable for the writing off on $7.5M on the with total shareholder return up The Airport plans to be Auckland’s Kakapo field in 2006. Andrew said that that A26.6% for the year. The Chair and leading business centre. Property devel- this was a portfolio decision and was business CEO spent most of the time on the new opment offers the company great oppor- as usual with directors fully aware and partici- 5 year plan. In the past, the Airport’s tunities for future growth and returns for pating in the decision. main focus was about managing infra- shareholders. structure at the airport and little about In response to question from the floor, Andrew Another area of growth is with the retail how they could grow the business. In suggested that gas would be a transition fuel business within the airport. Special the last three years, a change in the for the next 25-30 years (with oil declining and attention is being given to understand business strategy has established a coal being not ecologically desirable) while new the effects of competition and what “Flight Path for growth.” energy sources are found. NZOG’s exploration needs to be achieved to achieve this is targeted towards gas. Some key objectives are to grow the objective. travel business, be fast and efficient, Three directors were up for election for two It was reported Queenstown and North strengthen their consumer business, positions. Of the nominees two (Tony Radford, Queensland airports produced satis- invest for the future, and work with the founding director and ex CEO), and David factory results. Scoffham (ex Shell, joined the board in 2003) other tourist operators like Tourism New were existing board members while the third, Zealand and Air NZ. The chair made positive comments about the future director program, which had Rod Ritchie (a geologist) was supported by the The Airport has been promoting new been a success. They now plan to appoint board – he may have actually been invited by travel markets and new routes by a new person in the coming year. the board to stand. attracting more airlines to come to It is unusual to see the board support a new Auckland. As an example, Chinese A new director Michelle Guthrie was voted appointment when sufficient existing directors arrivals were up 104% this year. They in, along with Sir Henry van der Haden are standing to fill vacancies and the chair hope to achieve 400,000 Chinese arrivals as the new Chair. Michelle Guthrie has was careful to be impartial and support all by F17. Another goal is to achieve 10 wide marketing and digital experience three equally. All three nominees spoke to the million international arrivals by F18, in her role as Google’s CEO for India, audience, Tony Radford’s main pitch was for up from 7,317 million this year and 20 China, Asia and the Pacific region, and return of up to 20c per share to shareholders million total passengers by F20, up from should be an asset. from the high cash buffer held by NZOG. 14,516 million in the last 12 months. At the end of the meeting compliments Unsurprisingly, voting by ballot confirmed the A major marketing campaign will be were paid to Joan Withers for her achieve- election of D Scoffham and M Ritchie, with launched in China. ments at the airport, her skill in building Tony Radford not elected. The Chair reported the Commerce a strong team, and for changing the way the company now sees the future. Vinny Venkatesh Commission was happy with the Airport pricing structure, which takes away some Des Hunt

The Scrip December 2013 33 Caught on the Net Compare KiwiSaver Funds fiduciary duty to maximise shareholder value Shadow banking: What it is, how it broke Sorted now has a website where you can find is a false notion that has done considerable and how to fix it the Kiwisaver fund that best suits your profile harm. More Shadow banking played a major role in the and compare fees, services and returns. Do investors have too much information? financial crisis. Reporting on a Q & A session More Eleanor Bloxham, CEO of the Value Alliance with Professor Perry Mehrling, Mike Koncsal Investors losing half of returns to fees does not think so. She takes aim at Security tries to explain it in an article in The Atlantic. More That’s the story in Australia, based on a study Exchange Commission Chief Mary Jo White, of 497 managed funds. Given the background who has discovered a supposed problem of How a British Carbon Credit pusher got of many NZ funds, you might expect to find a “information overload”. More a listing on a Danish Stock Exchange, similar pattern here. More How anxiety can lead your decisions brokered by a New Zealand financial company, run by an Australian residing How investment bankers determine if a astray in Switzerland share is over or under valued Consulting others before making major Yep it is another scam involving a NZ company This is valuation 101, written with an decisions might seem like a wise move. with no presence here other than a serviced important proviso - ‘value does not always Francesca Gino, in an HBR blog, discusses office. This Naked Capitalism article suggests equal price.’ More research which showed those in an anxious state were more likely to seek and accept that while authorities here are trying to clean When to ignore ‘tried and true’ investing advice. They also had less ability to discern up our dodgy companies, they are still well rules between good and bad advice. More behind the 8 ball. More Many investing theories that seem simple Everything you were afraid to ask about Your life savings are not a spectator are more nuanced and complicated than you Bitcoin sport migh think, says Bryan Borzykowski on BBC Hedge funds and index trackers are polar Capital. More Bitcoin has been back in the news lately. If you are still trying to understand it you opposites; the highest and lowest fee ends Being a long term investor in a short are not alone. This article by Rumpletatskin, of the investment product scale. Yet a term world first published in Australian dollar,,may help. surprising numbers of hedge funders are Barry Ritholtz, posting on ‘The Big Picture” More fans of indexing claims Paul Amery writing discusses what time means to investors. in Index Universe. Given the publication, the The risk that dare not speak its name More probable bias is open. More World sharemarkets are again ploughing Why the “Maximising Shareholder upwards. But what if there is a risk that the Value” theory of corporate governance market does not like to think about - that the Bruce Parkes is bogus global economy could slip back into recession, Yves Smith, in Naked Capitalism, says asks ‘Buttonwood” in an Economist blog. the mantra that the CEO and Board has a More

The Scrip December 2013 34 Branch Reports

Branch Contacts We recognise that branch reports in our newsletter do not adequately Auckland Andrew Reding [email protected] represent the expertise and preparation of those presenting. The Waikato John Davies [email protected] work of these professionals who give their time is appreciated by all Bay of Plenty Jane Lyndon [email protected] who attend. Members are encouraged to refer to the individual com- Wellington Martin Dowse [email protected] pany websites for the latest news and disclosures. Canterbury Robin Harrison [email protected] Auckland n 20th November, the questions to Eric Barret of Sanford One of the interesting points to emerge from this presentation was covered quotas, boats, salmon and skipjack. Having just the suggestion that investors have become more laid back and Oannounced his 2013 result, Eric was well equipped with the are not reacting so emotionally to events that, in the past, would latest slides and information for investors, which can be seen at have had induced significant volatility into the markets. Another the Sanford website under investors/presentations pertinent point was the thought that there is no shortage of liquidity The second speaker of the evening was Brian Gaynor, well known and this could result in interest rates remaining relatively low and to just about everyone from his prominent role in Milford Asset Management, his regular informative and well read columns in the press and previous well received presentations to the Auckland Branch. Again, Brian did not disappoint his audience. His talk this time was around the changes in the New Zealand share market from immediately before the GFC (Global Financial Crisis) (NZX 4333), through the darkest days of the GFC (NZX 2417) and finally up to the present day (NZX 4892). It was illustrated with a meaningful slideshow with good supporting statistical information that identified the best and worst performers over the period under the spotlight. (see page 3) Brian also compared the performance of NZX alongside several of the major world markets that have been through the same cycle.

The Scrip December 2013 35 that following on from this investors may be prepared Future Auckland Branch Meetings to take on greater risk. A further observation drew a connection between new issues absorbing available All at Alexandra Park Convention Centre, Green Lane. 7pm tea and coffee cash that, in turn, could influence increases in prices for – 7.30 pm start existing shares. 2014 Possibly one of the most interesting charts that Brian Wednesday 19th February showed was the classic “Boom- Bust” cycle included Speaker:- Jeff Greenslade, CEO, Heartland Bank with this report. Whilst we may be somewhere on the Wednesday 9th April, David Hisco, CEO (NZ) ANZ Bank steeper part of the rising curve, in reality it is anyone’s guess where the markets actually are at this time …this Wednesday 18th June, Speakers to be advised will only be revealed by looking behind us from some Wednesday 17th September, Speakers to be advised point in the future. Wednesday 19th November, Speakers to be advised The presentation was followed by a range of questions Future Company Visits and the final thought “if you could predict the market, These are being organised for March, May, July, August, October, December. would there be a market at all?” Details will be published nearer the date. Robert Johnston

Bay of Plenty he Bay of Plenty Branch had their last Discussion Group Our Christmas function is on 3 December and our guest speaker is meeting for 2013 on 25 October. It was an excellent meeting Brian Gaynor. We have over 100 members registered to attend and Twith interesting contributions from many mÅembers present. members are really looking forward to this event. We covered company results for members’ most popular share- Our first Discussion Group meeting will be held on Friday, 28 holdings, discussed material from Peter Lynch on stock fallacies, February 2014. Russell Garland from Forsyth Barr will be our guest Warren Buffett’s 2011 Annual Report discussion on gold. Kerry speaker talking about the year ahead. Drumm spoke about the NZSA website company information. March 26, we will be holding our first “After 5” event for the year The Australian Foundation will be giving their bi-annual presen- with David Pilkington, the new Chairman of Port of Tauranga as our tation at Tauranga’s Trinity Wharf on 2 December. Attendance is guest speaker. Then a company visit to Trustpower will take place expected to be very good going by NZSA registrations plus their March 28. A busy and interesting start to 2014 own shareholders. Jane Lyndon

The Scrip December 2013 36 Waikato Canterbury e had Vince Hawksworth, Chief he Canterbury Branch Committee Executive of Trustpower as our has been busy attending a number of Upcoming Events Wguest speaker at our gathering on Tcompany AGMs, acting as NZSA proxy 29th Oct. Very enlightening presentation holder and ensuring shareholder interests especially their wind farm developments in are address by the company boards (these For more information go to Branch section of Australia and how these are funded. are reported elsewhere in the Scrip). NZSA website Sir Henry van der Heyden will be the guest Our next function will be on 5th December in speaker for our Christmas Dinner Function, the Fendalton Croquet Club where we will be 2014 3rd Dec, to be attended by 85 members, holding our End-of-Year Social with Branch February 19 Auckland Branch meeting partners and guests. Secretary Peter Heffernan running the “fun February 24 Waikato Branch meeting and informative” trivia quiz with dividends! Our programme for 2014 starts with February 28 Bay of Plenty Branch meeting Peter will also present some interesting and 25 February 2014, Mark Lister, Head of possibly relevant video clips. This annual March 11 Wellington Branch meeting Private Wealth Research, Craigs Investment event is always entertaining and inform- Partners March Waikato Branch meeting (date to ative for members. March 2014, John Williamson, Managing be confirmed) Finally, the Committee is progressing Director, Hellaby Holdings Ltd (date to be March 26 `` Bay of Plenty Branch meeting with plans for an IT education event for confirmed) members early next year and with devel- March 28 Bay of Plenty company visit Tuesday, 22 April 2014, Gordon MacLeod, oping a touring South Island “roadshow” April 8 Wellington Branch meeting Chief Financial Officer, to bring information of the NZSA’s work April 9 Auckland Branch meeting Ltd and successes to a wider audience in the April 22 Waikato Branch meeting Tuesday, 27 May 2014, Martin Hawes, regional centres. May 27 Waikato Branch meeting Financial Advisor and media commentator. Robin Harrison John Davies Wellington hank you to branch members and the committee for your several new investor/new member evenings where real investors talk support during 2013. It has been a busy year and we have had about how they got started and how they approach DIY investing. Ta great variety of meetings and speakers. All the best for Christmas and I look forward to seeing some of you For 2014, our meeting will be held on the second Tuesday of each at our next branch meeting in March 2014. month (March to November) from 7:30pm to 9:30pm. As well as Martin Dowse having guest speakers from listed companies we will look at running

The Scrip December 2013 37 Members’ Issues Political Donations - A tax on shareholders Hard copy harder to get at Dillon has asked about is shown on our website under on Foster has Don believes, this the court action against John Resources/Policy Statements. ordered hard is an erosion of the PBanks and his declaration of 1 A contribution by public com- Dcopy for all NZ right to receive hard anonymous donations after the panies to political entities is company reports. copy. Auckland mayoralty campaign. inappropriate use of share- However, he has Editor: We believe “At the drop of a hat Sky holders’ funds. The NZSA op- seen reports become that each share- management was prepared poses political donations. more and more holder is entitled to to donate without John Banks 2 Should a donations or contri- complex causing stipulate his own showing the company name, bution of a political nature be many shareholders default position, and splitting into two $25000 to made, it should be disclosed to read only the that this instruction avoid the rules. The donation and fully explained in the an- first few pages, and should be binding has been admitted by company. nual report. Where they have companies to duck on a registry until Is it legal to do this sort of trans- occurred, there should be full disclosure, by (a) formally revoked. action? How is it accounted for an agenda item on the AGM providing simplified Both Computershare in the financial report as there notice to allow for discussion substitutes, and (b) and Link usually presumably no receipt? Certainly of the matter. by forcing share- accept this position. it is not ethical. “ 3 Nothing in this policy pre- holders to receive vents directors or company full reports on line. Editor: While New Zealand law executives making personal They do this by allows companies to make political political donations or ex- saying the default donations, Chairman of Sky City, pressing personal political position is to receive Chris Moller, at the 2012 AGM views outside the context of reports on line, and assured our proxy holder that the position they occupy in asking shareholders the company now has a policy the company. This is their to make a written not to make donations to political unassailable democratic right request for hard copy parties or candidates. NZSA too at each publication. has a clear policy on this, which

The Scrip December 2013 38 NEW ZEALAND SHAREHOLDERS ASSOCIATION INC PO Box 6310, Wellesley Street, Auckland Ph (09) 309-9768 Website – www.nzshareholders.co.nz Chairman John Hawkins [email protected] 021 640 588 Secretary/Treasurer Chris Curlett secretary-treasurer@nzshareholders. 021738032 co.nz Governance Issues Grant Diggle [email protected] Legal & Regulatory Gayatri Jaduram [email protected] Legal & Regulatory Lyn Lim [email protected] Auckland Issues Andrew Reding [email protected] AGM Co-ordination Max Smith [email protected] Company Research Martin Watson [email protected] Co-opted Associates Proxy Co-ordination Jacquie Hagberg [email protected] Corporate Liaison Des Hunt [email protected] (9) 521 6117 The Scrip Alan Best [email protected] (9) 524 0317

Disclaimer

Comments or information contained in this newsletter or other editions of The Scrip, or within courses conducted by the NZ Share- holders Association including related course books, should not be construed as providing investment advice under the provisions of the Securities Markets Act of 1988 or its Amendments, or the Financial Advisers Act 2008. The point of our activities is to provide you with Editor Alan Best the tools needed to enable you to assess investment proposals, and decide for yourself. Layout Bruce Parkes

ISSN: The National Library has allocated the International Standard Serial Number 1179-4275 to The Scrip so that researchers will have access to our material.